Electronic Arts 2011 Annual Report Download - page 44

For fiscal 2012, the Committee has adopted a new funding formula for the Executive Bonus Plan. In prior years,
including fiscal 2011, a minimum non-GAAP earnings per share target was used as a funding gate and
achievement of the target resulted in the funding of the maximum individual bonus amount for each NEO. While
the maximum bonus funding and payout will remain 300 percent of each NEO’s base salary for fiscal 2012, the
funding of the maximum bonus opportunity will increase or decrease proportionally with changes in our
non-GAAP net income. The maximum bonus funding for each NEO will be the lower of: (1) 300 percent of their
annual base salary and (2) 0.5 percent of non-GAAP net income for each NEO other than Mr. Riccitiello, for
whom this maximum is 1.0 percent of non-GAAP net income. The Committee retains the discretion to award
less, but not more, than the fully funded bonus amount. The Committee believes this change will better align the
Executive Bonus Plan funding with the profitability of the Company.
Time-Based RSU Awards
In fiscal 2011, each of our NEOs was granted time-based RSUs with a three-year vesting schedule. The
Committee granted time-based RSUs to enhance retention and provide stability across our management team
during a period of Company transformation. The amount of these RSU awards was determined taking into
consideration a number of factors including: Company and individual performance, the market value of each
NEO’s then-outstanding equity holdings, external equity compensation practices, and internal compensation
alignment.
Performance-Based Equity Awards in Fiscal 2012
For fiscal 2012, the Committee approved a change to our long-term equity program. The number of RSUs
granted to our NEOs will be a combination of 50 percent performance-based and 50 percent time-based RSUs.
Performance-based RSUs will be granted in-lieu of half of the time-based RSUs that would otherwise have been
granted for the purpose of further aligning the compensation of our NEOs with Company performance,
stockholders’ interests, and in response to the feedback provided by our stockholders.
The number of performance-based RSUs that can be earned will be based on the Company’s total stockholder
return (“TSR”) relative to the performance of the companies in the NASDAQ-100 Index over a one, two, and
three-year period. In each period, the number of shares that each executive can earn will range from 0 percent to
200 percent of the target award. In order to earn 100 percent of the target award, EA’s TSR needs to be at the 60th
percentile of the TSR of companies in the NASDAQ-100 Index. The 60th percentile was chosen because it
requires EA to outperform the majority of companies in the NASDAQ-100 Index in order for the targeted
number of shares to vest. If our TSR is above or below the 60th percentile the number of shares earned will
increase by three percent for each percentile above, and decrease by two percent for each percentile below.
The use of both time-based and performance-based RSUs for fiscal 2012 balances our desire to drive long-term
stock price growth with the retention pressures we face from our direct peers, as well as from emerging and
evolving competitors.
Prior Performance-Based RSU Program
We have previously utilized performance-based equity to motivate and reward increased profitability. Each of
our NEOs has an outstanding performance-based restricted stock unit award that was granted in fiscal 2009 (or
upon hire, in the case of Mr. Schappert). These performance-based RSUs may be earned based upon the
Company’s achievement of one of three progressively higher adjusted non-GAAP net income targets (as
measured on a trailing-four-quarter basis). These targets range from approximately two to three times the
Company’s non-GAAP net income for fiscal 2008 and can be earned though the performance period ending on
June 30, 2013. To the extent that the Company does not achieve one or more of the non-GAAP net income
targets, the portion of the award that would have been earned upon the achievement of the applicable target will
be cancelled. At the time these performance-based RSUs were granted to our NEOs, we believed that
achievement of the first adjusted non-GAAP net income target was probable. As of March 31, 2011, no shares of
the fiscal 2009 performance-based RSUs had been earned.
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